The same price can produce different after-tax proceeds
Transaction structure should be modeled before it is fixed in the LOI.
An equity sale and an asset sale can produce materially different tax results even when the headline purchase price is identical.
In an equity sale, owners generally sell their interests in the company. The character and amount of gain depend on factors including tax basis, entity type, holding period, and applicable law.
In an asset sale, the company transfers specified assets, and the buyer assumes specified liabilities; liabilities not assumed generally remain with the seller, subject to applicable law and the definitive agreement. The price is allocated among categories such as receivables, inventory, equipment, identifiable intangible assets, and goodwill. Different categories may produce different tax character. Depreciation recapture and entity-level tax can matter, and a C corporation may face tax at the corporate level followed by tax when proceeds are distributed to shareholders.
Buyers may favor an asset acquisition because the allocated purchase price can create tax basis in acquired assets and because selected liabilities can be assumed. Sellers may favor an equity sale for tax efficiency or simplicity. Entity elections and transaction-specific structures can alter those general tendencies.
The correct comparison is after-tax, after-adjustment proceeds—not the stated multiple. Model federal, state, and local taxes; transaction expenses; debt repayment; working-capital adjustments; contingent consideration; and the timing of payments. If parties choose a structure that creates a tax benefit for one side and a cost for the other, that difference may become part of the commercial negotiation.
Tax laws and individual circumstances vary and change. A qualified tax adviser should analyze the alternatives before the letter of intent (LOI) establishes the form of the transaction.